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The proposed deal, which had been worth 765p per British Energy share, had been controversial over fears that it would have led to a significant reduction in competition in Britain’s already highly consolidated energy industry.

Peter Luff, the chairman of the Commons Business and Enterprise Select Committee, said last week that the expected takeover threatened to reduce price transparency in the electricity market and create an overly dominant player that would add to upward pressure on prices paid by consumers.

British Energy operates one coal-fired and eight ageing nuclear power stations, including Hinkley Point, Torness and Dungeness. EDF had been the only bidder to have submitted a serious offer before the May deadline. EDF said last night: “After in-depth discussions, EDF considers that the conditions for a major development in Great Britain are not met to date.” It is due to hold a press conference in Paris this morning.

Since Britain’s current nuclear reactors were built in the 1960s and 1970s, it has lost many of the high-end engineering skills needed to replace the fleet — a complex project. French expertise was thought, therefore, to be essential to train a new generation of British nuclear engineers and to help them to build and run the new plants.

When the deal was in the offing it was presented as a huge bonanza for the French nuclear industry, which is also angling to win similar contracts in other countries considering new-build nuclear programmes, including South Africa and China.

EDF Energy's spokesman Andrew Brown said the company had not closed the door entirely on a deal with British Energy.

"You can be assurred we are still interested in investing in the British nuclear industry," he said. "EDF's interest in the industry in the UK pre-dates discussions with British Energy. We have other options but are still interested in discussion with BE."

A statement released by The Department for Business, Enterprise & Regulatory Reform said: Our commitment to nuclear power is clear. The go ahead for new nuclear power, alongside our action to promote energy saving and renewables is in Britain's long term national interest.

"The level of interest in nuclear new build remains high and recent months have shown there are strong signals of an appetite for this from the market. Recent developments in energy markets underline the need for new nuclear to combat high fossil fuel prices, climate change and security of supply."

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